Today Gammon gold agreed to buy Capital Gold in an all-share transaction valued at approximately US$146.5 million.
Lest there be any misunderstanding that Century's 13-cent share price and its US$17 million market cap undervalues the company, consider what Gammon is getting for its US$146.5 million:
Capital produces approximately 50,000 oz/yr from a heap leach operation in Mexico. Capital has 832,000 oz in low grade reserves (0.66 g/tonne) with a recovery rate of 66.8%, giving recoverable reserves of 555,800 oz at single property in Mexico. Cash costs are $290/oz.
They have another 855,000 oz in M&I resources and 181,000 oz of indicated resources.
By comparison, the Lamaque project alone has 1,135,000 oz of 4.56 g/tonne reserves with a 95% recovery rate, giving recoverable reserves of 1,078,000 oz. This is almost double Capital's recoverable reserves.
Lamaque has more M&I Resources and over 3 million ounces in the inferred category.
If Capital's 50,000 oz/yr operation in Mexico is worth $US146.5 million, how much is Century's San Juan operation worth - especially when it reaches production of 30,000 oz/yr? You'd have to think that San Juan alone is worth a lot more than CMM's current market cap of $17 million.
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